Starting the second quarter

We have left the first quarter of the year behind expectations. Unfortunately, each year is getting stranger than the last. We entered 2022 with globally unforeseen commodity prices and tension between Russia and Ukraine, followed by a war. We are also facing inflation and cost of living issues in Turkey in addition to this. These issues dominate the domestic agenda. We are trying to adapt to this new environment on a wide scale, from the real sector to the consumer, due to prices nearly doubling from last year’s. But neither producers, intermediaries, nor consumers have been able to fully adapt.

It is obvious that this is a very difficult process. As a matter of fact, the data announced while I was writing this article show that there is a massive expansion in the number of people behind on payments for their credit cards or personal loans. Employees’ wages increased, which started the new year satisfactorily, disappeared in three months. (See graph: Number of people who did not pay their credit cards and personal loans) 


Confidence indices, which became clear last week, show that the confidence gap between consumption and production may have started to narrow after a peak. TurkStat announces the consumer confidence index for the month on the third week of each month. Last week, the Central Bank announced the real sector confidence index on the producer side in the industrial sector and TurkStat released the confidence indices of the companies in the services, retail trade, and construction sectors. If we take the average of the real sector, service, retail, and construction confidence indices and call them the producer confidence index, the graph you see below emerges.

In past years, there would have been a difference of about 20 percentage points between producer and consumer confidence. This gap has widened over the past year. While the confidence on the consumer side decreased, it increased on the producer side and the difference reached 41.2 points, breaking a record. However, in the last two months, the producer confidence index seems to have turned downwards. We will see whether the gap will close in the coming months and how this will realize in terms of effects. However, for now, we can predict that consumer confidence will remain flat, while producer confidence may weaken. (See graph: Producer and consumer confidence) 


The March results of the PMI index, which is an important leading data in terms of industrial production and growth, were announced last Friday morning. The index, which has slowed down in recent months and towards 50, was announced as 49.4 points. The index fell below 50 for the first time in 10 months.

The chemical, ready-to-wear, and land-sea vehicles sectors grew while the index value contracted in 10 different sectors surveyed for the PMI. The chemical industry has been keeping the overall PMI index alive in recent months. Cost of living and the Russia-Ukraine war pulled down the overall PMI, although the industry kept its growth in March as well. It was noteworthy that there was a sudden and sharp contraction in the food sector. The fact that the rising costs and prices brought down consumer demand may have played a role in this movement of the sector, which contracted sharply compared to previous months.


Inflation and the cost of living will again be at the top of the economic agenda in April. We will start the month with inflation data for March. The forecasts of daily DUNYA columnist Alaattin Aktas show that the monthly CPI increase will be around 9%. In this case, the CPI will have increased by 66-69% on an annual basis. Thus, we will witness the highest inflation since 2001. The speech of the Central Bank governor on the inflation report on April 28 will also be remarkable.


Immediately after inflation, the Ministry of Commerce will announce provisional foreign trade data for March. We can expect that the double-digit increase in both exports and imports will continue in March. While exports increased by 21.4% in the first two months of the year, the increase in imports was 49.7%. (See graph: Monthly foreign trade) 

The foreign trade deficit, which was USD 6.4bn in the same period last year, increased to USD 18.5bn this year, as the increase in imports was much higher than exports. The current momentum is likely to continue over the next few months.

We will wrap up the week with the market participants survey that will be announced on Friday morning.

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